Neogen Chemicals IPO opens today

Excerpt: Specialty chemical maker Neogen Chemicals opens its initial public offer for subscription today on April 24. It is the fourth company coming out with a public issue in the FY-20.

Specialty chemical maker Neogen Chemicals opens its initial public offer for subscription today on April 24. It is the fourth company coming out with a public issue in the financial year 2019-20, after Rail Vikas Nigam, Polycab India and Metropolis Healthcare.

The issue will close on April 26. The book running lead manager to the offer is Inga Advisors Private Limited and Batlivala & Karani Securities India Private Limited is the co-book running lead manager.

NCL manufactures specialty organic bromine-based chemical compounds (bromine compounds) and other specialty organic chemical compounds as well as specialty inorganic lithium-based chemicals compounds (lithium compounds and together with the bromine compounds the products). They commenced their business operations in 1991, at Mahape, Navi Mumbai manufacturing facility with a few bromine compounds and lithium compounds.

As on February 28, 2019, NCL manufactured an aggregate of 198 products comprising 181 organic chemicals and 17 inorganic chemicals.

In addition to manufacturing their standard products, NCL also undertakes custom synthesis and contract manufacturing.

Company’s manufacturing facilities are located in Mahape, Navi Mumbai in Maharashtra (Mahape Facility) and Karakhadi, Vadodara in Gujarat (Vadodara Facility).

Neogen has established a customer base of about 1,363 customers of which 1,237 are domestic customers and 126 customers are international customers that include Austin Chemical Company Inc, USA, CBC Co Ltd (Japan), Divi's Laboratories, Laurus Labs, Solvay Specialties India, Thermax and Voltas.

The IPO consists of a fresh issue aggregating up to Rs 70 crore by the company and an offer for sale of up to 16,99,600 equity shares by Haridas Thakarshi Kanani and up to 12,00,400 shares by Beena Haridas Kanani (promoters).

The issue price band is fixed at Rs 212-215 per share. Bids can be made for a minimum lot of 65 equity shares and in multiples of 65 equity shares thereafter. The anchor investor offer period will be one working day prior to the issue opening date, that is April 23.

The company has aimed to raise Rs 131.48 crore at the lower end of price band and Rs 132.35 crore at the upper end.

The main objective of the issue is to use fresh issue proceeds for repayment of all or a portion of certain borrowings, early redemption of 9.8 percent FRCPS, long term working capital, and general corporate purposes.

The company will not get any money from the offer for sale issue that will go to selling shareholders - Haridas Thakarshi Kanani and Beena Haridas Kanani.

Financials

With increased capacity through expansion and acquisition, the company reported 19.7 percent YoY CAGR rise in consolidated operating revenue over FY14-18 to Rs 164.01 crore in FY18. Average business from organic and inorganic compounds stood at 68 percent and 32 percent, respectively, over FY14-18. For the 9M FY19, consolidated operating revenue stood at Rs 159.23 crore. The company reported a 26.1 percent CAGR rise in consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) over FY14-18 to Rs 28.99 crore in FY18. EBITDA margin improved from 14.4 percent in FY14 to 17.7 percent in FY18. In M9FY19, consolidated EBITDA stood at Rs 27.13 crore with a margin of 17 percent.